Buying a Foreclosed Home
As Chilliwack Mortgage Brokers we’ve taken it upon ourselves to share some Pros and Cons about buying a foreclosed home.
Process of purchasing a foreclosed house:
- Original offer goes in and is reviewed by the foreclosing company. If the offer is accepted a court date will be set for any additional parties, to put a bid on the property. Once the offer is accepted, the price is posted for the public to see.
- At court if no other parties show up the original bid wins and the property is theirs.
- If additional parties show up, then usually bids are sealed in an envelope and handed to the judge (at this point the original bidder can adjust their offer). The judge unseals the bids and then decides which bid is best for the foreclosing company. While price is a large factor on this decision, he will consider other factors such as closing date. The secondary factors are generally the tie breaker if two bids are very close.
The pros of buying a Foreclosed home:
- When shopping for a foreclosed home, the lender is eager to recuperate their loss and will want to sell the property quickly.
- They often sell the home at a lower price than it was initially. If you purchase the home through an auction, you may receive the house at a lower price.
- Homes in BC go through an Auction Process. At Court you’ll know what the official bid is. And know the base purchase price that you need to start.
- If you are lucky enough to put the initial bid on the house, and no one shows up for the court auction, you’ll get the house for your initial bid.
- This option can be beneficial if you’re a landlord with plans to buy and fix up cheaper properties and then rent them out.
- If the property goes for a cheaper price, you can use the money you’ve saved for maintenance purposes or to making home improvements, thereby increasing its value and your home equity in the process. You may even be able to sell the property at a profit some day. Within Canada you can add renovation costs into your mortgage to fix up the property of any maintenance wants & needs.
The cons of buying a foreclosed home:
- While foreclosed properties can be cheaper than the usual price, they are not rock-bottom prices, as you might have heard. Often, you would acquire the home at only a slightly cheaper price than it was initially.
- Foreclosed properties can have a low initial bid. Once they go to auction, some people pay more then the market value.
- The legal and financial procedures for buying a foreclosed home are stricter and more complicated than the average home sale.
- Foreclosed homes are usually sold in a “what you see, is what you get” state, meaning you’ll have to cover all repairs/renovations by yourself. Meaning if owners still in house while being foreclosed, any damage made by the owner will come out of your pocket.
- Any possessions left by the previous owner are your responsibility